Homework Answers
1) Option B i,e. Expansionary monetary policy is correct
Base for the solution
Expansionary monetary policy results in increased money triggering interest rates to fall. When the rates are lower, the fixed exchange rate becomes stable and attractive.
2) Option B i,e. Fall, the current account is correct option.
Base for the solution
Output will fallls when the exchange rate is unattractive,because it affects current account . the trade between the country and other countries do not exist because of the exchange rate depreciation.
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15,16
Question Completion Status: QUESTION 15 With a fixed exchange rate, what would be effective stabilization...
A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers...
A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers want to use temporary expansionary monetary policy to increase both output and the current account balance. Will they be successful? Only with increasing output Only with increasing the current account balance No, not with either goal Yes, with both goals In the short run, if taxes rise, output will_and the exchange rate will increase; appreciate increase; depreciate decrease; appreciate decrease; depreciate With a fixed...
With a fixed exchange rate, what would increase output in the short run? Contractionary fiscal policy...
With a fixed exchange rate, what would increase output in the short run? Contractionary fiscal policy Contractionary monetary policy Expansionary fiscal policy Expansionary monetary policy
17 18 QUESTION 17 Suppose a country's central bank announces that it is decreasing the long-run...
17 18
QUESTION 17 Suppose a country's central bank announces that it is decreasing the long-run money growth rate to tame inflation. The country's currency will suddenly and its rate of depreciation will then O appreciate; rise O depreciate; rise appreciate; fall O depreciate; fall QUESTION 18 A balance of payments crisis is OA a sharp change in interest rates sparked by a change in expectations about the level of exports. ов. a sharp change in foreign reserves sparked by...
19 20 QUESTION 19 A country with a floating exchange rate faces a short-run recession and...
19 20
QUESTION 19 A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers want to use temporary expansionary monetary policy to increase both output and the current account balance. Will they be successful? O Only with increasing output O Only with increasing the current account balance O No, not with either goal Yes, with both goals QUESTION 20 and output will In the short run, if the central bank decreases the money supply,...
6. (Problem 6) An economy is facing the inflationary gap shown in the accompanying diagram. Aggregate...
6. (Problem 6) An economy is facing the inflationary gap shown in the accompanying diagram. Aggregate price level LRAS SRAS Real GDP Potential —YpY output To eliminate the gap, should the central bank use expansionary or contractionary monetary policy? How will the interest rate, investment spending, consumer spending, real GDP, and the aggregate price level change as monetary policy closes the inflationary gap? The central bank can use contractionary monetary policy. The interest rate will rise, which would encourage a...
7,8 Question Completion Status: QUESTION 7 Under standard assumptions, in the short run, currency devaluation causes...
7,8
Question Completion Status: QUESTION 7 Under standard assumptions, in the short run, currency devaluation causes a country's output to O rise. fall. O remain unchanged. QUESTION 8 Which type of global exchange rate regime creates an asymmetry, with only one country able to conduct independent monetary policy? Floating exchange rates Gold standard Managed float Reserve currency system QUESTION 9 then country A's currency will be
1. Under a floating exchange rate regime with a high degree of capital mobility, in the...
1. Under a floating exchange rate regime with a high degree of capital mobility, in the short run an expansionary fiscal policy will most likely create pressure on: a. the domestic currency to appreciate. b. the domestic currency to depreciate. c. monetary authorities to revalue the domestic currency. d. monetary authorities to devalue the domestic currency. 2. Under a floating exchange rate regime with a high degree of capital mobility, a change in the exchange rate value of domestic currency...
Which of the following contributed to the abandonment of the Bretton Woods Exchange Rate System? Political...
Which of the following contributed to the abandonment of the Bretton Woods Exchange Rate System? Political and economic instability between World War I and World War lI. Expansionary fiscal policy in the United States during the 1960s. Contractionary fiscal policy in the United States during the 1960s. Excessive lending preceding the financial crisis of 2008-2009. QUESTION 8 Which one of the following is a benefit of establishing a fixed exchange rate policy? Monetary policy flexiblity. Price stability during expansionary fiscal...
Pls do not handwrite the answer, this is for easy reading Question 4 a)Country Alpha has...
Pls do not handwrite the answer, this is for easy reading Question 4 a)Country Alpha has a fixed exchange rate system and free capital mobility. Due to an economic recession and a trade deficit, it is pursuing an expansionary fiscal policy to improve the country’s balance of payments. Illustrate and discuss if this expansionary fiscal policy is effective to achieve the country’s economic growth and balance of payments. b)Country Sigma is an open economy with a flexible exchange rate and...
Be sure to answer all five parts of this question. What would happen to the U.S....
Be sure to answer all five parts of this question. What would happen to the U.S. current account in each of the following situations? Choose either fall (become more negative or smaller), rise (become more positive or larger), no change, or uncertain. a) If the real dollar exchange rate appreciates, the U.S. current account will A. Rise B. Fall C. No change D. Uncertain b) If U.S. disposable income falls, the U.S. current account will A. Rise B. Fall C....
A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers want to use temporary expansionary monetary policy to increase both output and the current account balance. Will they be successful? Only with increasing output Only with increasing the current account balance No, not with either goal Yes, with both goals In the short run, if taxes rise, output will_and the exchange rate will increase; appreciate increase; depreciate decrease; appreciate decrease; depreciate With a fixed...
With a fixed exchange rate, what would increase output in the short run? Contractionary fiscal policy Contractionary monetary policy Expansionary fiscal policy Expansionary monetary policy
17 18
QUESTION 17 Suppose a country's central bank announces that it is decreasing the long-run money growth rate to tame inflation. The country's currency will suddenly and its rate of depreciation will then O appreciate; rise O depreciate; rise appreciate; fall O depreciate; fall QUESTION 18 A balance of payments crisis is OA a sharp change in interest rates sparked by a change in expectations about the level of exports. ов. a sharp change in foreign reserves sparked by...
19 20
QUESTION 19 A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers want to use temporary expansionary monetary policy to increase both output and the current account balance. Will they be successful? O Only with increasing output O Only with increasing the current account balance O No, not with either goal Yes, with both goals QUESTION 20 and output will In the short run, if the central bank decreases the money supply,...
6. (Problem 6) An economy is facing the inflationary gap shown in the accompanying diagram. Aggregate price level LRAS SRAS Real GDP Potential —YpY output To eliminate the gap, should the central bank use expansionary or contractionary monetary policy? How will the interest rate, investment spending, consumer spending, real GDP, and the aggregate price level change as monetary policy closes the inflationary gap? The central bank can use contractionary monetary policy. The interest rate will rise, which would encourage a...
7,8
Question Completion Status: QUESTION 7 Under standard assumptions, in the short run, currency devaluation causes a country's output to O rise. fall. O remain unchanged. QUESTION 8 Which type of global exchange rate regime creates an asymmetry, with only one country able to conduct independent monetary policy? Floating exchange rates Gold standard Managed float Reserve currency system QUESTION 9 then country A's currency will be
Which of the following contributed to the abandonment of the Bretton Woods Exchange Rate System? Political and economic instability between World War I and World War lI. Expansionary fiscal policy in the United States during the 1960s. Contractionary fiscal policy in the United States during the 1960s. Excessive lending preceding the financial crisis of 2008-2009. QUESTION 8 Which one of the following is a benefit of establishing a fixed exchange rate policy? Monetary policy flexiblity. Price stability during expansionary fiscal...
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